Revenues at Mitel (NASDAQ:MITL)(TSX:MNW) were up this past quarter – largely thanks to an acquisition – but the firm’s revenue streams were declining too quickly in one vertical and growing too slowly in another, hampering the company’s overall first quarter earnings.
The 45-year-old Ottawa communications firm, which said last week that it planned to be acquired by investor group Searchlight Capital in a $2-billion deal, reported revenues of $313.8 million for the three-month period ending March 31 after markets had closed on Wednesday. (All figures in USD.)
That’s significantly higher than the $223.1 million in revenues over the same period a year ago, though the increase is largely attributable to Mitel’s $430-million acquisition of California-based ShoreTel last July.
Had the two firms been operating together this time last year, the revenues for the quarter would’ve been roughly $310.2 million, Mitel says. If last year’s foreign exchange rates had been consistent with this past quarter, those revenues would’ve been slightly higher at $324.8 million.
Mitel posted a net loss of $21 million for the quarter, slightly deeper than its loss a year ago. Including ShoreTel’s revenues with the same constant currency figures, however, would’ve put last year’s loss at $41.6 million.
The firm says its on-premise revenue stream contracted faster than expected this past quarter, and that while its cloud-based business was growing in line with management’s expectations, the number of new bookings was also down compared to last year.
It’s this phenomenon – Mitel’s transition from a declining on-premise business to new cloud-based prospects – that CEO Rich McBee cited as the primary motivation to take the firm private again.
When the acquisition was first announced, McBee told OBJ that Mitel’s transitioning business model was “pretty tricky” to navigate in a public environment where delivering shareholder value is the main priority, and that the firm would benefit from the long-term thinking allowed through private ownership.
The company’s board of directors, including co-founder Terry Matthews, seemingly agreed and unanimously endorsed the acquisition.
Mitel’s share price has held steady this past week as the firm remains in a go-to market period when it can entertain offers from competing bidders. If Searchlight’s acquisition goes through, the deal is expected to close in the second half of 2018.